The personal guarantor did business through various corporate entities that he owned directly or indirectly. The personal guarantor and the guarantor’s corporate entities (three of which make up the “debtors” in this proceeding) (collectively, the “borrowers”) had an ongoing banking relationship with a bank employee that lasted throughout the time that the employee moved to several different banks. Eventually, the bank employee began working for the creditor, and the creditor and borrowers began a banking relationship. The bank employee remained the borrowers’ primary contact with the new lender. The creditor extended the borrowers the “973 loan,” which was evidenced by the 973 note and a master agreement that provided that the maturity date could be extended by the creditor “sending [the borrowers] written notice” or “requir[ing] [the borrowers] to sign a modification.” The 973 maturity date was extended twice, and the borrowers allege it was also extended a third time. The first maturity date extension was discussed via email between the personal guarantor and the bank employee. The bank employee informed the personal guarantor that the extension had been granted, and the next day, an unsigned letter was issued by the creditor to the personal guarantor confirming the extension. The second maturity date extension was evidenced by a letter again (substantially similar to the first) and then followed by an email to the personal guarantor from the bank employee stating the loan had been extended. The alleged third maturity date extension was far less clear; the creditor argued the extension was only for 60 days, while the borrowers argued the extension was for 6 months. Internal emails indicated that a third extension had never been approved beyond the 60-day mark, but the bank employee seemed to believe it had been extended for 6 months. The bank employee texted the personal guarantor regarding renewal documents and stated the “line was booked,” and the texts were followed by a letter, similar to the previous two extension letters, to the personal guarantor stating that the maturity date had been extended by 60 days. Soon after, the bank employee and another bank officer informed the personal guarantor, via a phone call, that the creditor was going to end the banking relationship and the 973 loan would not be extended past the 60 days. Communications between the bank employee and the personal guarantor, however, continued, and the bank employee’s communications seemed to suggest that the 973 loan could be extended again, although no evidence suggested that the creditor had agreed to this. Earlier in the banking relationship, the creditor also extended a “063 loan,” as evidenced by the 063 note, which stipulated that any default under any other agreement between the parties would also constitute a default under the 063 note. At the end of the 60-day extension of the 973 loan, the creditor brought a state court action against the borrowers for breach of contract under the two notes and related loan agreements (including guaranty agreements) for failure to pay on the maturity date (the “state court litigation”). The debtors counterclaimed, alleging breach of contract by the creditor for failing to extend the maturity dates of the notes, mutual departure, and fraudulent and negligent misrepresentation. The borrowers all asserted numerous affirmative defenses with respect to the claims against them. While the state court litigation was pending, the debtors filed for chapter 11 bankruptcy and removed the state court action to the bankruptcy court. The creditor filed a motion for summary judgment in its favor as to all claims, counterclaims, and affirmative defenses.
In First-Citizens Bank & Trust Co. v. Parker Med. Holding Co. (In re Parker Med. Holding Co.), 664 B.R. 905 (Bankr. N.D. Ga. 2024), the bankruptcy court granted the creditor’s motion for summary judgment in part and denied the motion in part. First, the court denied summary judgment in favor of the creditor as to all the claims it brought because there were genuine issues of material fact regarding whether the maturity date on the 973 note had been extended a third time beyond the 60-day period. The court explained that all the creditor’s claims hinged on the maturity date of the 973 note, and when construing the evidence in the light most favorable to the defendants (as is required on summary judgment motions), questions remained as to whether the bank employee had agreed to extend the maturity date. The court specifically noted that questions remained as to whether some of the emails from the bank employee constituted a written notice of an additional extension (because written notice was enough to extend under the 973 master agreement). Second, the court denied summary judgment for the same reasons as to the debtors’ breach of contract counterclaim, which alleged the creditor breached the contract by failing to honor the extended maturity date. The court again stated that factual issues remained as to whether the maturity date had been extended by the bank employee. Third, the court granted summary judgment in favor of the creditor as to the debtors’ “mutual departure” counterclaim. Georgia state law provides that where parties to a contract “depart from its terms and pay or receive money under such departure,” the parties may not then recover for failure to act according to the contract unless notice of intention to rely on the contract is given by the party that seeks to rely on the contract. Code Ann. § 13-4-4. Until that notice is given, the contract is suspended by the departure from it. Id. The court explained that, usually, whether parties have departed from the contract is a question for the fact finder; however, summary judgment may be granted when there is no evidence to support such a finding. The court found no evidence of departure and explained that the debtors’ argument that the creditor departed because of an alleged agreement to extend the maturity date was not evidence of departure because there was nothing to support a finding that the creditor ever extended the maturity date without a written notice, which was the required method to extend under the 973 master agreement. Fourth, the court granted summary judgment in favor of the creditor as to the debtors’ fraudulent misrepresentation counterclaim but denied summary judgment as to the negligent misrepresentation counterclaim (that the creditor’s employee had allegedly represented that he did or would extend the maturity date). To succeed on a claim for fraudulent misrepresentation, the borrowers needed to show that the misrepresentations or falsehoods were made knowingly. The court, however, found that the borrowers provided no evidence that the creditor or any of its employees knowingly lied regarding the extension. In fact, the court stated that the evidence showed that the bank employee “believed the 973 [l]ine would be extended.” To have succeeded on their claim for negligent misrepresentation, the borrowers would have needed to show that the creditor “‘negligently supplied false information to foreseeable persons…who reasonably relied upon that false information, and…economic injury proximately resulted from such reliance.’” Brown v. Sullivan, No. CV 115-035, 2017 WL 3446027, 2017 U.S. Dist. LEXIS 127155 (S.D. Ga. Aug. 10, 2017). The bank employee allegedly made several representations that the loan would be extended, although the employee denied making such representations regarding the 973 note. Therefore, the court found that issues of fact remained regarding the negligent misrepresentation counterclaim. Next, the court granted summary judgment in favor of the creditor as to its claim that the guarantors waived all counterclaims and defenses. Georgia state law provides that a guarantor may, in advance (such as in a part of a guarantor agreement), “waive[] defenses otherwise available to a guarantor.” HWA Props., Inc. v. Community & Southern Bank, 746 S.E.2d 609 (Ga. 2013). The court further provided caselaw that showed that Georgia had consistently and broadly upheld advanced guarantor waivers of defenses and counterclaims. In relevant part, the guaranties each provided that the guarantor “waive[d] any and all rights or defenses” and “further waive[d] and agree[d] not to assert or claim at any time any…counterclaim…” The court found the language of the guaranties was sufficient to establish waiver. The court then granted summary judgment in favor of the creditor as to the borrowers’ tortious interference counterclaim. To succeed on a claim for tortious interference with contractual relations, a party must show the defendant (1) acted without privilege; (2) acted intentionally and with malice with the intent to injure; (3) caused an anticipated business relationship to fail; and (4) that the conduct that caused the failure was tortious. The court found that there was no evidence that any contract existed with which the creditor had interfered or that any of the creditor’s actions had been done with malice or intent to injure the borrowers; rather, the evidence supported the conclusion that the creditor simply wished to leave the banking relationship. Finally, the court granted summary judgment in favor of the creditor as to all the borrowers’ defenses, as these defenses were waived when the borrowers failed to respond to any of the creditor’s arguments on the defenses and failed to offer any evidence in support of them.
By Kristin Meurer [email protected]
Edited By Hayden Mariott [email protected]